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GAO Reveals New Flaws in Stimulus Job Creation Claims

A new report from the Government Accountability Office concludes that the Obama administration's recent claims about the number of jobs saved or created by stimulus spending are flawed.

Stimulus Scorecard
Stimulus Scorecard

Just how many jobs have been created and the accuracy of those numbers have been the subject of intense media attention, scrutiny and criticism since the White House touted the Recovery Board’s report that claimed approximately 640,329 jobs had been created or saved through contracts, grants and loans in the stimulus package.

On Thursday, the Government Accountability Office (GAO) will issue its mandated bimonthly report on the Recovery Act, and the focus will be squarely on the jobs issue, addressing the accuracy criticisms, while also offering recommendations on how to improve the system of reporting from the more than 100,000 recipients of stimulus funds.

The GAO says the numbers are inaccurate and provides scenarios where both understating and overstating the figures may have occurred. The GAO report, however, does not include revisions or changes to the administration's job claims so far and the GAO does not plan to issue its own number.

Simultaneous to the report’s release, Gene L. Dodaro, Acting Comptroller General of the United States, is scheduled to testify before a House committee on the GAO report.

CNBC has obtained a draft copy of the testimony. Dodaro will offer recommendations on improving the process, but he is clear that the GAO has determined that the overall number of jobs created or saved is not valid.

“Without normalizing the FTE (full-time equivalents), aggregate numbers should not be considered,” Dodaro writes in the written testimony.

The Office of Management and Budget, which provides guidance on the reporting process, decided not to include indirect job creation. Any part-time job creation is worked into the FTE model, which calculates the projected full-time jobs directly saved or created. In laymen’s terms, only the equivalent of full-time jobs in terms of hours worked have been counted in the estimated 640,329 jobs.

This is a flaw addressed by the GAO. “A fuller picture of the employment effect would include not only the direct jobs reported but also the indirect and induced employment gains resulting from government spending,” says Dodaro.

From this perspective, the number might actually be higher.

That has not deterred Rep. Darrell Issa (R-Calif.), The Ranking Member of the House Committee on Oversight and Government Reform, from being a vocal critic of the whole process. Last week, Issa wrote Earl Devaney, who oversees Recovery.gov, and asked if the employment numbers could be certified as accurate and auditable.

Devaney could not certify them.

“It’s a startling admission that he hasn’t even been provided with a list of who should have reported, which means he can’t know who didn’t report, which just adds fuel to the argument that the whole effort at transparency has failed,” Issa said in a statement on Wednesday. “The Administration has provided inaccurate data, missing data, data that might be missing but they don’t even know for sure and they should be a part of Thursday’s hearing to answer for these discrepancies.”

From the beginning of the effort to transparently report on how the $787 billion is spent, the Recovery Board has qualified the process by stating that discrepancies were expected, and it would be a constant “work in progress”.

In addition, the Recovery Board only received $25 million to run the site and vet the billions of dollars slated to be spent. As of September 30, approximately $159 billion worth of spending had to be accounted for.

Despite the early admission of possible inconsistencies and the potentially under-funded vetting process, there has been an onslaught of reports of gross inaccuracies—from phantom Congressional Districts receiving money to dozens of jobs created by the purchase of a $1,000 lawnmower.

They are right there for all to see at Recovery.gov, and those with the patience to pore through all the data have found some holes, for sure.

And so has the GAO. Here are some other issues uncovered by the GAO in the report:

  • It found that 3,978 recipients reported jobs created or saved without actually receiving ANY Recovery Act funds.
  • It also says that 9,247 reports showed the receipt of money but NO JOBS were created or saved.

Some of the problems stem from the fact that recipients do the reporting, and there aren’t sufficient resources to vet the reports. There is also a strong chance that recipients simply made mistakes submitting the data.

In addition, there have been over 100 allegations of fraud surrounding Recovery Act funds. More than half are at various investigative phases, while 41 have been dismissed.

In the final analysis, the GAO concludes it has been a “lessons learned process”, and there should be changes to how jobs created and saved are defined, while continuing to work with recipients to accurately report the impact of Recover Act funds.

Molly Mazilu contributed to this report. Be sure to get in touch with us:stimulus@cnbc.com